JOHANNESBURG (miningweekly.com) – Precious metals company Sibanye-Stillwater on Thursday highlighted its exposure to what are being referenced across mining jurisdictions as the ‘rock star’ commodities of the moment, in a Covid-19 and climate-struck world.

After presenting 718%-higher half-year earnings and announcing the dividend distribution of R1.3-billion on an all-time record performance in spite of Covid, Sibanye-Stillwater CEO Neal Froneman displayed a slide listing metals close the hearts of Southern Africans. (Also watch attached Creamer Media video.)

“The exposure to what I’ve seen referenced as ‘rock star’ commodities at the right time is reflected in this slide,” Froneman said, displaying a slide that showed the huge performance of rhodium, which is now many times more costly than gold. The price quoted by one prominent manufacturer of autocatalysts showed rhodium to have clawed back much of its Covid losses to trade at $12 200/oz.

Also held ‘rock star’ high by Froneman were more platinum group metals (PGMs) such as ruthenium, palladium and iridium. These were followed up on his displayed list by silver, gold, nickel, copper and platinum.

“These are really at the top end and very pleasingly we have significant exposure to these metals at the right time,” he said during the webcast in which Mining Weekly participated.

Rhodium made up 21% of Sibanye’s revenue, on a par with Sibanye’s gold mines, which produced 12 554 kg, with gold now trading at more than R1-million a kilogram.

“Platinum is the laggard but I think it’s safe to say that we’re very well positioned for what we believe is a platinum market which for the medium- and long-term has some really good underpinning fundamentals. So, we look forward to getting the benefit from the future upside in platinum as well,” he said.

Sibanye’s South African PGMs business contributed 54% of group adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda). Sibanye’s half-year Ebitda of R16.5-billion was 718% up on the corresponding period of 2019.

SUPPLY AND DEMAND

On global PGMs production going forward, Sibanye is estimating a 15% year-on-year decline in supply in 2020, mainly because of Covid’s impact on South African PGMs production, and a 20% fall in demand from about 70-million passenger vehicles, which require PGMs to meet ever-tightening vehicle emission standards worldwide.

“We only expect passenger vehicle sales to return to 2019 levels in 2022,” said Froneman, adding that the outlook for platinum jewellery demand had been revised down by 20% for 2020 and 2021.

Rhodium is expected to move closer to balance in 2020/21. Although the platinum surplus narrows now, Froneman projected a rising platinum surplus in 2021 on increased production from South Africa.

PLATINUM TO SUBSTITUTE PALLADIUM

“I have seen some commentary that there is some suggestion that substitution of palladium with platinum in autocatalysis won't happen. I can assure you that it will happen. It’s inevitable. If we don’t substitute palladium with platinum, we will not alleviate the sustained palladium deficits and OEMs have a need to reduce their costs.

“That will also provide a solution to the increase in the cost of rhodium. Overall, we remain positive about the overall basket price when these moves take place and I expect that you’ll have much better visibility of substitution from 2021,” Froneman said.

As far as Sibanye itself is concerned, the Johannesburg- and New York-listed company is guiding lower 2020 production in all of the regions where it mines.

Costs are mainly up owing to lower Covid-hit volumes. “Unit costs do increase because of the higher fixed cost component and we’ve adjusted capital costs to suit.

The rand gold price above R1-million a kilogram and the four element PGMs price more than offset the reduction in the volumes and the increase in costs.

“We actually see the second half of the year as being significantly better than the first half from a profitability point of view,” he said.

SOUTH AFRICAN PGMS OPERATIONS UP

PGMs production from the South Africa’s PGM operations increased by 5% year-on-year to 657 828 4Eoz, with the inclusion of the Marikana operations for the full six-month period offsetting lost Covid-related production.

The all-in sustaining cost (AISC) of R19 277/4Eoz ($1 156/4Eoz) was 46% higher year-on-year, mainly as a result of significantly lower second-quarter Covid-disrupted production and the inclusion of higher cost Marikana production.

The higher-cost Marikana production stemmed from its entirely conventional production, which is higher relative to the significant amount of lower cost mechanised production at Rustenburg and Kroondal. The cost of the Marikana smelting and refining operations comprised 42% of production for the period compared with 13% for the corresponding period of last year.

The integration of Marikana had continued to progress, with the Marikana operation contributing R3.9-billion, or 44% of total adjusted Ebitda from the South African PGM operations.

Identified annual synergies from Marikana had more than doubled from initial estimates of R730-million a year, to an estimated annual rate of up to R1.85-billion in annual synergies by the end of 2020.

SOUTH AFRICAN GOLD OPERATIONS

Production from the South African gold operations of 403 621 oz was 17% higher than for the comparable period in 2019, with AISC decreasing by 8% to R800 048/kg ($1 493/oz) compared with the same period in 2019, which was impacted by the strike across the managed gold operations, excluding DRDGold.

Gold production from the managed gold operations, excluding DRDGold, which is heading for a nigh sevenfold earnings increase, increased by 24% to 10 167/kg (326 877/oz) despite the lockdown.

Covid disruption affected most of the April 2020 milling period with a steady build-up from May into June. By the end of June, almost 70% of the crews had returned to work and were operating at slightly above planned efficiency levels. Despite second quarter Covid disruption, AISC from the gold operations decreased by 14% to R846 741/kg ($1 580/oz), but well above the forecast expected under normalised production conditions.